TRP - 280 - The Fed Raised Rates – Here's Where the Opportunity Is
This month, the Fed raised rates a quarter point, and another increase looks likely. I'd figured it was coming – a lot of it ties back to the ongoing situation in the Middle East. But the move itself isn't what I want to spend our time on. The real question is where the opportunity is. For the last six to nine months I've said the same thing: higher for longer. And when you step back, this isn't a high-rate market at all. The last 15 years of very low rates were the exception. Across the last 30 or 40 years, this is a normal rate environment. That's what's expected. That's why the old 2011-to-2021 playbook (buy a value-add deal in multifamily or commercial and exit into lower rates) doesn't work today. A lot of people are still penciling deals on the assumption rates come down in 24 to 36 months. You don't have that certainty. This may simply be the new normal. So where's the opportunity? Two places I'm focused on. First, distress. Over the next 12 to 24 months, a wave of REO and bank-owned properties is coming to market. When you can buy at a significant discount to a property's value, you get cash flow now and the ability to exit at today's market and still make a strong profit. Second, single-family homes. Higher rates have slowed housing and made it harder for sellers – and that's opened a real door for a team like ours. We've bought and sold hundreds of homes over the years, and we've put real energy back into it because of what we're seeing right now. One caution, and it's not about real estate: the stock market has run for four or five years, but every asset class is cyclical, and a retracement always comes. Be watchful there. Bottom line – the opportunity is there, but only if you look at it with intentionality and through the right lens. Join Our Investor Club: https://tinyurl.com/43sfztkp
